On the surface, it seems like owning a business only makes your personal finances more complicated. You have to deal with more paperwork when tax season rolls around and you have to keep books for your business. But while the financial paperwork does increase, having a business of your own can make a big difference in your personal finances in a positive way.
As a business owner, there are often opportunities to reduce your tax burden. Business expenses are tax deductible and, if your business is based on something you’d be doing anyway, you may even be able to deduct purchases you’d make whether or not you run a business. You do want to be sure that such an expense is actually necessary to the success of your business, so you can show proof when the IRS audits you.
Margin of Safety
If you’re running a small business on the side, you can have more secure finances in the event of a problem with your day job. In the event of a layoff, your business will still be bringing in money. It may not be as much as you’re used to earning, but it can keep things a little more manageable in the short run.
Opportunity for Growth
One of the nice things about having your own business is that you can earn additional income even if you’re already working full time. But the opportunity to increase your income with a business is much better than with an employer. After all, there is an upper limit to what most employers are willing to pay their workers, even when the worker in question is helping the business to bring in plenty of income. If you own the business, however, you can continue to increase your own income by increasing that of the business.
Entrepreneurs really do have a unique mindset, focusing on self-reliance and self-improvement. The typical business owner is always looking for opportunities to move forward, which can be crucial. It’s easy to remain at a job or in a situation because you’ve gotten used to it, but having a small business can help you create a forward-thinking mindset, no matter the size of the business you’ve started.
Editor’s Note: Mindset is extremely important. Who knows? Having a “can do” attitude might even help you land that promotion you found impossible to get before!
Starting a Business
It is important to have a good grasp on your finances in general before you start a new business. A new business, after all, typically requires investment. Depending on the type of business you choose, you’ll have the option of investing time or money — but investing either requires having a good grasp on where your money and time are already going.
Not everyone wants to own their own business and if your priorities don’t include entrepreneurship, it’s probably not worth the time and effort a good business requires. Nor should you start a business just for little things like tax breaks (the IRS looks out for such situations). But if you have an entrepreneurial bent, there’s no time like the present to explore the benefits of starting up a business of your own.